DAVID STOCKMAN: It's True, The BLS Data Is Made Up

After countless attempts to discredit or defend Friday's jobs
report, we can all agree on one thing: The data is complicated.
So complicated that the BLS could make the economy look
better than it was and no one would be sure.

Bruce– Great job on the Summers catch, but I’m wondering if
this goes much deeper. I don’t particularly believe in tin
foil hats, but all of these mainstream economists treat the
BLS and BEA data like it’s holy writ—when it’s evident that
the reports are so massaged, estimated, deemed, revised,
re-bench marked and seasonally adjusted that
any month-to-month change has a decent chance of being
noise. What deep secret might they be hiding?

So on the labor force participation rate they say, “No it didn’t
go down in January because the 2012 numbers are re-bench
marked for the 2010 census,” but for some reason the BLS
didn’t bother to update the 2011 civilian population
numbers, including December. Thus, the BLS published
apples-to-oranges numbers on this particular variable
and the footnote says the December participation rate would
have been the same as January, if they had revised it!

Yet on another variable— the establishment survey jobs
count—they were also busy re-benchmarking–but here they did
update the originally reported numbers for every month of 2011.
Even then, it is hard to say what got updated because the
originally reported numbers each month are then revised
during the next two reporting months—with any excess or
shortfall reallocated to earlier months outside the three
month window, which are not published on a revised basis,
even though they have been revised! This reflects a wacko
thing called the concurrent seasonal adjustment method.

Anyway, like Summers did in his TV riff, you can always pick
and choose a half dozen noise points in every monthly report
to support your favored trend. But obviously, your point is that
the longer-term trend of the labor force participation rate
is really bad, and this truth is absolutely validated by the
January report. Except it would have been equally bad in
December had it been reported with the new census data. As
Gartman says, the trend is from the “upper left to the lower
right”, and it’s heading off the page.

But the mainstream narrative never gets to the trend. In this
case, the plain fact is that we are warehousing a larger
and larger population of adults who are one way or another living
off transfer payments, relatives, sub-prime credit, and the
black market. My suspicion is that this negative trend and many
others like it get buried by the monthly change chatter from
mainstream economists and on bubble vision, and that these
monthly deltas are so heavily manipulated as to be almost a
made-up reality. Call it the economists’ Truman Show.

The
attached series for the “raw” or
unadjusted establishment survey employment change
for January goes back to the 1980s and makes me wonder.
Since 2000, the January job loss against a December payroll
of between 130 and 135 million has varied within a tiny
range of about 150,000. Other than January 2009 when the
economy was being smacked by the post-Lehman melt-down in
the financial markets, this means that the unadjusted
January payroll count declined within a super-tight range of
2.00% to 2.20% of the December payroll.

Really? Granted the U.S. economy is a regular fellow, but how
could there be such astounding uniformity every January,
year after year in the raw numbers, as in the following
sequence for January 2001 thru January 2012, respectively:
2.16%, 2.19%, 2.05%, 2.03%, 2,03%, 1.96%, 2.03% 2.19%, 2.73%
(2009 outlier), 2.20%, 2.18% and 2.02%.

After all, you have weather aberrations, huge fluctuations in
year to year economic conditions, the weak, random nature of
the establishment survey, the constant fiddling with the
birth-death adjustment which is carried in the raw numbers,
the Christmas shopping season variation from red hot-to-punk
across the years, the timing of the survey week and much
more. And the dice always lands on almost exactly a
2.03% change from December. Right.

This is meant to be a long-winded encouragement to you to apply
your patented numbers forensic skills to the monthly BLS
reports or any of the other market movers. In the last
7 years, for example, the Christmas shopping season has been
all over the lot and presumably, retail hiring, too. But the
unadjusted retail jobs reduction in January vs. December has
not varied by much more than 150,000 from a base count of 15
million. That’s a 1% variation, notwithstanding the huge
shopping season differences they report on bubble vision.

In short, if you spend a little time with these numbers you will
know that they are being made up. Funny thing that I
remember during the depths of the 1982 recession Reagan read
in Human Events one night that the seasonally adjusted
numbers were being manipulated and one should look at the
unadjusted numbers, instead. The next morning during an
economic update briefing Reagan said, he wanted to talk about
the ”unadjusted” unemployment rate. Marty Feldstein turned
white as a ghost, and then talked him out of it. Hmmm!